Correlation Between Radico Khaitan and Xchanging Solutions

Can any of the company-specific risk be diversified away by investing in both Radico Khaitan and Xchanging Solutions at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Radico Khaitan and Xchanging Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Radico Khaitan Limited and Xchanging Solutions Limited, you can compare the effects of market volatilities on Radico Khaitan and Xchanging Solutions and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Radico Khaitan with a short position of Xchanging Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radico Khaitan and Xchanging Solutions.

Diversification Opportunities for Radico Khaitan and Xchanging Solutions

-0.65

Correlation Coefficient

Radico Khaitan  Xchanging Solutions

Excellent diversification

The 3 months correlation between Radico and Xchanging is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Radico Khaitan Limited and Xchanging Solutions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xchanging Solutions and Radico Khaitan is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Radico Khaitan Limited are associated (or correlated) with Xchanging Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xchanging Solutions has no effect on the direction of Radico Khaitan i.e., Radico Khaitan and Xchanging Solutions go up and down completely randomly.

Pair Corralation between Radico Khaitan and Xchanging Solutions

Assuming the 90 days trading horizon Radico Khaitan is expected to generate 1.8 times less return on investment than Xchanging Solutions. But when comparing it to its historical volatility, Radico Khaitan Limited is 1.21 times less risky than Xchanging Solutions. It trades about 0.23 of its potential returns per unit of risk. Xchanging Solutions Limited is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  10,675  in Xchanging Solutions Limited on September 13, 2024 and sell it today you would earn a total of  1,384  from holding Xchanging Solutions Limited or generate 12.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

Radico Khaitan Limited  vs.  Xchanging Solutions Limited

Radico Khaitan

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Radico Khaitan Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, Radico Khaitan sustained solid returns over the last few months and may actually be approaching a breakup point.

Xchanging Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xchanging Solutions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Xchanging Solutions is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Radico Khaitan and Xchanging Solutions

The main advantage of trading using opposite Radico Khaitan and Xchanging Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radico Khaitan position performs unexpectedly, Xchanging Solutions can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Xchanging Solutions will offset losses from the drop in Xchanging Solutions' long position.

The idea behind Radico Khaitan Limited and Xchanging Solutions Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.